Delta Airlines Boosts Profit Forecast Amid Strong Demand and Premium Ticket Sales

Delta has forecasted full-year adjusted earnings at the high end of its previously stated range. The airline has also raised its estimate for free cash generation this year. Delta will hold its investor day on Tuesday and report second-quarter results next month.

On Tuesday June 27, Delta Air Lines raised its second-quarter forecast and estimated full-year adjusted earnings of $6 per share, at the high end of the estimates it provided last April. Strong travel demand and trade-ups to more expensive fare classes continue to drive growth.

Delta now forecasts adjusted earnings per share of $2.25 to $2.50 for the second quarter, up from the previous range of $2 to $2.25 per share. CEO Ed Bastian mentioned that the company’s second-quarter earnings, to be reported next month, could be the highest ever for the April-June period.

“The demand, as you know, as anyone that’s traveling knows, is off the chain,” Bastian said in an interview with CNBC’s “Squawk Box.”

Delta shares rose 6.8% on Tuesday, reaching $46.09, a more than two-year high.

During an investor day presentation on Tuesday, the airline also raised its estimate for free cash generation this year to $3 billion from $2 billion. Delta reinstated its quarterly dividend earlier this month.

Delta, along with its competitors, has reported strong travel demand, particularly for international trips, while other sectors have faced challenges due to inflation and other issues. The airline industry has also experienced growth constraints due to air traffic controller shortages, delays in new aircraft, and a shortage of new pilots, which has helped keep fares stable.

In addition to resilient demand, airlines are benefiting from jet fuel prices that are down about 30% from a year ago.

Furthermore, Delta forecasted revenue per available seat mile, a measure of an airline’s revenue generated per unit of flight, to increase by as much as 18% compared to last year. This is an increase from the previous forecast of 15% to 17% growth.

The airline has consistently highlighted customers’ willingness to upgrade to more expensive seats, including those with extra legroom and first class. Premium revenue is expected to reach approximately $19 billion this year, accounting for a 35% share of total revenue, up from a 24% share in 2014.

The carrier also mentioned that its profitable partnership with American Express credit cards continues to grow, generating an estimated $6.5 billion this year, compared to $4 billion in 2019.